Florida Parents Avoid Cookie-Cutter Plans
Do Florida parents Need Revocable Trusts? A big issue for my Florida parents of young kids is deciding whether their particular circumstances call for the need for a Revocable Trust. An alternative to the Revocable Trust is a complex will with a springing component. This Will allows a trust to “spring to life” if certain conditions occur (“Will/Trust combo”). The inquiry as to the benefits and risks of each estate planning vehicle (Revocable Trust vs. Will/Trust Combo) is, of course, fact specific—it depends on your assets, the age of your kids, how you hold property and your risk tolerance. In other words, it takes analysis. A cookie-cutter plan just won’t cut it. Rather, a deep analysis is required regarding whether you, as a Florida parent, need a Revocable Trust for your family.
When you visit an Estate Planning attorney, your property, money, accounts, life insurance, etc. is analyzed so that you receive recommendations that suit your needs. Relying merely on what your neighbor did, or obtaining a cheap online trust, may end up costing you tens of thousands of dollars later in attorney and court fees. It cannot be stressed enough that estate planning is not a “do-it-yourself” simplicity, unless you have a very simple estate. If you have young kids, you do not qualify for the short-cuts. That is, regardless of the amount of money that you have, Florida parents of young kids do not have simple estates that allow for cookie-cutter plans.
In the interest of keeping this short, this blog assumes you already understand the nuts and bolts of Revocable Trusts. Generally, a Revocable Trust is a “living document,” whereby a trustee is the legal owner of your property. At the start, the person making the trust is also the trustee. Eventually, that will change if the owner of the trust cannot manage it on their own, or dies. The document may be changed (“revoked”) in whole or part. If you would like more of an explanation, check out these blogs/pages:
Florida Parents Need Revocable Trusts
A. Privacy is the #1 Reason why Florida Parents Need Revocable Trusts
Unlike a Will, a Revocable Trust is a private document that you do not share with anyone beyond the trustees and beneficiaries. Not even banks get a copy of it (rather they get the simplified version called the Certificate of Trust). As the trust document is not filed with the court, no one knows your “biz.” For instance, non-beneficiaries and your friends cannot obtain a copy just for their own viewing pleasure. Compare: A Complex/Will Trust combo becomes a public document after you die, thus, you receive “zero” privacy.
B. Predator protection
As noted above, when a Will is filed with the Court, anyone can see it. Good people and bad people. So beyond just wanting general privacy, there is a component that involves keeping your documents out of the hands of the wrong people. Predators (frauds or friends/family with ill-intentions) gain access to the amounts of inheritances with the public Will. For some people, the privacy of a Trust is very attractive to avoid the problems that may occur when your “stuff” and “who gets what” becomes public knowledge. Compare: A Complex/Will Trust combo becomes a public document after you die, thus, it contains no predator protection.
C. Florida Probate Expenses Avoided
When you decide you do not need a Revocable Trust, your estate MUST enter the probate court for your assets to be distributed. If you do not know what probate is, check out our probate page. The main thing to know is that it costs money and it takes time to get through the court system. Usually the expenses of probate outweigh the courts of drafting the Revocable Trust. Compare: A Complex/Will trust combo does not avoid probate. Therefore, you have the costs of drafting it, and then later the costs of probate attorney fees and court costs. The costs of probate rises along with your assets. Probate will cost thousands of dollars.
D. Avoid financial guardian appointment for children
A great component is the ability to manage your funds and set up a sub-trust for your kids. There are so many options and such flexibility with trusts that they are the very best method of setting forth distribution guidelines on behalf of your children. Compare: A Complex Will/Trust combo also allows the appointment of a financial guardian. (Further compare that custodian accounts usually provide money to children at younger ages (maybe too young for you) and do not allow guidelines to be established).
E. Multiple Properties
If you have multiple properties, a Revocable Trust may make sense depending on how you use the property. Keep in mind that if it is rental property, you may consider an LLC instead of your family trust, and assign the interests to the trust accordingly. A second home, especially in another state, will greatly benefit by being held in the family trust. Compare: A Complex Will/Trust combo only deals with Florida properties. The more properties you have, the more probate will cost. If you have properties in other states, you will need another probate in those states as well (more $$$).
Reasons you may not Need Revocable Trusts for Florida Parents
A. Homestead Issues Complicate
Complicated Florida Constitutional laws usually call for the homestead to be kept out of the Revocable Trust. (See this blog for more details). As homes are usually your greatest asset, at times, it is tough to want to incur the costs of the Revocable Trust if you do not plan to place your home in it. However, keep in mind that due to the factors of joint tenancy and homestead, there are many reasons to keep your home out of the Trust, but many good reasons to put your other property in it. Compare: A Complex Will/Trust combo will treat the home the same if it is not put in trust, however the home will be distributed according to the Trust provisions. Thus, the home will go through probate in both situations.
B. Overkill for Florida Parents Believing they Need a Revocable Trust?
You may not yet have a substantial amount of liquid assets or properties. Rather, the bulk of your estate may be life insurance and the family home. If life insurance does not exist yet (triggers upon death), you may question why the need for the trust. The Revocable Trust is a safeguard to avoid the life insurance funds having to go through probate ($ and time), and to place restrictions upon your children’s use of the money. It will avoid the appointment of a guardian to deal with this money as young kids cannot inherit it. So, it may seem like overkill but it is a risk analysis and determination of your comfort level in praying nothing bad happens.
More effort is involved meaning that the Revocable Trust must be “funded” with money (or it is useless). To accomplish the funding, it is usually best to speak to a good financial advisor about the best mechanism for each particular asset. For instance, you wouldn’t change the title of your life insurance policy to the trust. Rather, you would make sure the beneficiary is the trust itself. Each of your assets needs this analysis. Compare: A Complex Will/Trust combo either funnels it all to specific beneficiaries directly (which is fine, but young kids cannot inherit property over a certain amount so listing minor children can be a costly mistake), or it funnels the assets to the estate, thereby, raising the probate expenses.
D. Plan Expenses
They are more complicated and take more work to draft. They usually cost at least $1,000 more than a Will. Then again, probate costs can be thousands of dollars more for your estate. You either pay the fixed expense now, or pay the variable cost later (as you do not yet know the costs of probate because it is based on the amount of probate assets). Compare: A Complex Will/Trust combo does not usually cost as much to draft and obtain, but the expenses saved may not be worth it in the end.
As you can see, there are pros and cons, but the pros in favor of the need for a Revocable Trust for Florida parents usually win. As a mother of a young child myself, I know the struggle in deciding what is best for your child. Would you like to contact us to talk out your situation?
Lori Vella is an Estate Planning and Business Attorney. She works virtually throughout Florida and New York, but has her home office in Tampa, Florida. She is mom to a little boy which ignited the passion for helping other families. She and her son enjoy car rides, playgrounds and taking mini-adventures. They also have an organic garden that surprisingly yields vegetables. Lori considers herself well-versed in Seinfeld and welcomes any trivia!
Disclaimer: The Law Office of Lori Vella’s website contains general information directed to Florida residents. This firm does not intend to give legal advice through its pages and/or blog. If you need legal advice, we encourage you to find an attorney licensed in your state. This language on this website does not create an attorney-client relationship between you and this firm.